By Ira Dugal
MUMBAI (Reuters) – India’s markets regulator is pushing fund houses to popularise monthly investments as low as 250 rupees, or $3, to expand the reach of equity investing in the world’s most populous country.
The Securities and Exchange Board of India (SEBI) is looking to introduce simpler customer identification rules and lower costs as it aims to popularise small-ticket investments via mutual funds, four sources familiar with the discussions said.
About 225 million investors currently invest via systematic investment plans (SIP) but a majority are from big cities. Introducing bite-sized SIPs would help take financial investments to smaller towns, which will give fund houses new markets to expand to.
The regulator hopes to build on the success of SIPs, through which investors pumped 223.6 billion rupees ($2.59 billion) a month, on average, into Indian equities last year. This has acted as a buffer at a time when foreign investors have turned sellers.
Last Friday, SEBI Chairperson Madhabi Puri Buch said that 250-rupee SIPs would be launched soon as a way to expand financial inclusion. She did not give further details.
For financial year 2024-25, SIPs have more than quadrupled to 2.1 trillion rupees so far from 2016-17, data from the Association of Mutual Funds in India showed.
India’s mutual fund industry manages 66.93 trillion rupees ($797.87 billion) in debt and equity assets.
It is working with the industry to reduce upfront costs related to customer identification and opening of accounts and settlements, an executive said, adding that a decision on the plan could be reached in one or two months.
The executive and other sources declined to be identified as the discussions with the regulator are not public.
A spokesperson for SEBI did not immediately respond to an email.
“We would like to take mutual funds to the masses,” said DP Singh, deputy managing director at SBI Mutual Fund.
The fund house, India’s largest asset management company by assets, will look to push 250-rupee SIPs through its parent SBI’s network but also through digital investment platforms once the regulator’s final rules are in.
When distributed through digital platforms with simplified know-your-customer rules, these bite-sized SIPs could become more commercially viable, Singh said.
While there is no bar on offering investment plans of 250 rupees or less, these options are not currently commercially viable, executives at two mutual fund houses said.
“We can cross-subsidise for a limited period of time but eventually costs will have to come down to help the product sustain,” one of them said.
EXPANDING DEMAND
Demand for equity investments has grown as young Indians, 40% of whom are under the age of 30, jump into the riskiest corners of the market, including futures and options.
Zerodha, India’s largest digital investment platform, has seen rising interest for SIPs below 500 rupees, said Neelesh Verma, the company’s product head for mutual funds.
While currently less than 5% of the platform’s total SIPs are under 500 rupees, Verma believes the product would bring in more young investors.
“It is a great way to attract Gen Z investors when they are ready to start investing.”
The 250-rupee SIP plans would offer hybrid funds, which invest in both debt and equity, SBI MF’s Singh said, adding this would ensure greater safety for investors with small surpluses.
(Reporting by Ira Dugal; Editing by Sonia Cheema)
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